TRUE: In practice, business goals do conflict with CSR program goals, and where they do, business goals trump.
Karnani wrote, "In circumstances in which profits and social welfare are in direct opposition, an appeal to corporate social responsibility will almost always be ineffective, because executives are unlikely to act voluntarily in the public interest and against shareholder interests." Karnani's statement that profits and social welfare at times conflict has been criticized as outdated. One person wrote in response, "We see from experience that profit and public interest are interdependent." This critic's comment through is an oversimplification.
Generally, the two may be interdependent, but Karnani is looking at the situations where the two conflict. He is right: business and CSR goals will experience conflict at some point in time for any given company. A hypothetical illustrates this point. Company A has hired a manager to oversee its operations. The manager now has a choice to make as he/she puts together a budget. He/she can retrofit all of the company's smokestacks with new and expensive carbon-reducing technology that the company can barely afford, or the manager can leave the current smokestacks alone. Regardless of your opinion on what the outcome ought to be, it is crucial to see that there is a conflict here between business goals and social welfare goals. An acknowledgement of this conflict arms us with additional information and provides us with a good starting point as we determine the root causes and most appropriate solutions to a problem.
ERROR: Karnani leaves stakeholders out of his analysis
In discussing how we might arrive at a solution to social problems, Karnani lists government regulation, citizen activism, and corporate self-regulation as the main players. Crucially, in this statement, Karnani leaves out the stakeholders who also play a role, constituencies including consumers, employees, suppliers, and others who are necessary for a business to succeed. Employee strikes in China make poor working conditions unprofitable for corporations. Consumer preferences for organic foods make putting organic food on the shelves a smart decision for Wal-Mart. Cheaper energy saving technologies, provided by suppliers, motivate companies to buy them and save on costs. In other words, where profits and social welfare conflict, stakeholders may hold the answer to realigning incentives such that the two no longer oppose each other.
Stakeholders are not only noticeably absent in Karnani's piece, but also detrimentally so, for the absence affects his analysis. Where a corporation is vigilant about its consumer CSR interests and desires that affect long-term demand for its products, the corporation designs a good CSR program to anticipate these needs. In this way, a good CSR program identifies strategic social and business opportunities. While there may not be a perfect match at times between business interests and public interests, a CSR officer can find the synergies that continue to ensure alignment. Thus, for consumers and other stakeholders who want to see companies act as good corporate citizens and for companies that want to stay relevant, a CSR program is now vital. Stakeholders and CSR programs also hold the keys to solving problems.